Here we go again: Changing COLA to cut Social Security?
Reports say Obama will again propose a supposed "technical fix" to Social Security: Using a "chained consumer price index" that reflects consumers' ability to choose substitutes as prices rise.
Here we go again: Changing COLA to cut Social Security?
Jeff Gelles, Inquirer Business Columnist
President Obama is due to offer a budget compromise next week, and it will reportedly include more means testing for Medicare and use of a "chained Consumer Price Index" to make Social Security cost-of-living adjustments - a flawed idea I've written about here and here.
Complaints about his strategy from the liberal side of the blogosphere were quick and predictable. "Compromiser in Chief" was the headline on the Huffington Post's mobile site for a story by Sam Stein explaining the administration's position. At Slate, a thoughtful piece by Matthew Yglesias questioned the wisdom of trying to compromise with a Republican party that makes repeated demands for "entitlement cuts" but that clearly doesn't want to trade anything in revenue - and, as Yglesias puts it, is eager to "run ads castigating Democrats for bankrupting the country so badly that they want to add Social Security cuts to the dastardly Medicare cuts they already implemented."
Don't think that's possible? Dream on, says Washington Monthly blogger Ed Kilgore:
The main data point we have on that possibility is the relentless GOP campaign against “Obama’s Medicare Cuts” in 2010 and 2012. If Paul Ryan—Paul Ryan—can pose as the savior of Medicare, standing bravely between his mother and mean old Barack Obama, then anything’s possible.
As this debate moves forward, it's crucial that Social Security's defenders focus on the misdirection underlying this proposed use of the chained CPI, a legitimate alternative measure of the impact of price increases on consumers that relies on their ability to choose substitutes as prices rise - something the ordinary CPI also does, though to a lesser extent. FactCheck.org, at Penn's Annenberg Public Policy Center, offers a good history of the debate over chaining here.
As FactCheck notes, there are good arguments that a chained index is, in general, a more accurate measure of how consumers experience prices increases. But that doesn't mean that switching Social Security and other government COLAs to a chained CPI is a mere "technical fix," as Obama may spin it with help from the Moment of Truth Project, the group led by Erskine Bowles and former Sen. Alan Simpson, former co-chairs of his unsuccessful National Commission on Fiscal Responsibility and Reform. Moment of Truth, one of several anti-debt organizations funded by billionaire Pete Peterson, recently updated its white paper promoting the chained CPI's use.
Economist Dean Baker at the Center for Economic and Policy Research has repeatedly challenged the grounding of the proposal, including in this piece in December when the idea was last floated. A key problem is that neither the ordinary CPI nor the chained alternative takes into account the particular spending patterns of the elderly, who, for example, spend relatively more on health care and housing and less on food and transportation than younger people.
Nor does chaining take into account the fact that elderly consumers are probably less well-equipped than other consumers to shop around or make substitutions, and may be less inclined to do so after a lifetime of habit formation.
A longtime experiment at the Bureau of Labor Statistics has attempted to model a special CPI for the elderly - you can read about it here. It might well be reasonable to finance a more robust version of the "CPI-E," and to use that to adjust Social Security benefits over time. Perhaps even a chained version - if economists can model elderly consumers' limited ability to make substitutions.
But to just a pick a different index because it saves money - enough to reduce a recipient's benefits by 6 percent after 20 years - is a lousy approach to policy.
As Baker says, America's seniors don't start out living high on the hog:
"The median income of people over age 65 is less than $20,000 a year. Nearly 70 percent of the elderly rely on Social Security benefits for more than half of their income and nearly 40 percent rely on Social Security for more than 90 percent of their income. These benefits average less than $15,000 a year."
The idea of a cost-of-living adjustment is to hold recipients harmless as prices rise. Measuring it accurately should be the priority - not cutting benefits to meet a political demand.
Ifsomething gets so expensive so retirees cant afford it why should it count in the calculation of their cost of living increase?— ian- Once again our illustrious POTUS has struck again. Instead of cutting funding to Pakistan, Afghanistan, we have to cut social security. Yes, SS is an 'entitlement'. You are entitled to the money you put into it. Its those people getting it that never put into it that are partially the problem, the other problem is the ridiculous spending problem our government has. Sure we flush money down the tubes to feed North Korea (who is walking around like the rooster of the yard itching for a fight with us) and yet we let our own citizens nearly starve to save some money. Disgusting.
@ian--so you're saying that if your grandma's medication cost goes up, she shouldn't get the adequate amount to pay for it, so she dies and frees up money for someone else?— ena1977 - Most people don't get COLA at their jobs. Not sure why SS recipients think they are entitled to them. SS was and still is designed to be a SUPPLEMENT to other income. It was NEVER designed for people to solely live on just SS.— Jim Wintersteen
- Yes, a supplement to the defined benefit pensions that most had in the past.
But ever since the greedy predators in the corporate world and on Wall Street changed retirement from defined benefit to defined contribution (with no guarantee that any of it would be there when needed for retirement) so that the financial scammers could get their greedy mitts on those dollars, most people are now finding that they rely on SS for most or all of their support in the "golden years."
The only ones making out in the new scam are the "advisers" and the already-rich who have access to expert financial advice - regular working people are at the mercy of the thieves at Goldman Sacks, et al.
The massive theft of pensions, retirement accounts, etc. has stolen more money for the 1% than they have scammed from their wars for profit that cost us trillions.
Mission accomplished.— JeffJenk - IF Obama and the Dems manage to gut Social Security and achieve what the rethugs could not do on their own, even when they had complete power, then the Democrats will justifiably lose major ground in the midterms next year.
Obama the socialist! Sure he is. He is not even a Democrat except in name only.
He is also the worst "bargainer" in political history.
He should have started from a position of increasing SS benefits, instituting means-testing so that millionaires who do not need it cannot collect it, raise the cap on paying this tax to cover all income, including capital gains, and standardize payouts so that the slave states do not starve their seniors.
Instead, he offers something the GOP was not even asking for and then moves even further to the extreme right to seal the deal.
Far too many people rely on SS to actually survive. Too bad no one in politics except Bernie Sanders and a handful of others really care about anyone other than the corporate owners.
Obama. You lied when you said you were a Democrat.
You lied when you said you would not cut SS.
You betray us when you side with the 1% against the people who elected you.
How anyone with even a two-digit IQ can call Obama and most Democrats commies or lefties is unexplainable except by noting the utter idiocy and dishonesty of anyone making that claim.
Thanks for nothing.— JeffJenk - JeffJenk: Go peddle your commie crapola somewhere else. SS is a SUPPLEMENT and was NEVER designed, even by your hero, FDR, to be the primary means of retirement support. If someone pays into the system, then they are entitled to that money, regardless of whether they are rich or not. Maybe if more people practiced some responsibility during their working years and saved for retirement they would not be in this situation. Oh right, who needs to save for retirement when we can buy a new iPhone and 22" rims and gold grills now.— Jim Wintersteen
- Did you ever look at your paycheck (assuming you get one instead of being a parasitic 1%er living off the work of others)?
SS is FICA.
Want to know what the "I" stands for?
Hint - it is not ENTITLEMENT!
It stands for INSURANCE for that is what it is - as in PAID FOR BENEFIT.
Gutting it to pay for tax breaks for millionaires may fit your elitist world view, but anyone with even a minimum of concern and caring for others would see the disasters wrought by the actions of the wealthy to take every last m=penny from working people have left a majority of people in this country in dire circumstances.
Your side is big on anecdotes (welfare queens, iPhones, 22" rims - racist much?).
Well, the stories of seniors eating pet food, skipping meds and medical care because they cannot afford it, and living in depressing isolation because they did not manage to become obscenely rich during their lives are far more real and commonplace.
In addition, all statistical analysis of conditions here confirm that the rich are getting richer and everyone else is falling into poverty, as planned.
Mission accomplished.— JeffJenk - I believe that social security was never intended to serve as a total retirement package. The much bigger story is the disappearance of defined benefit pensions. Also, folks just have to save money. There is no doubt that smartphones are a major influence on our society. Perhaps, though, the invention of credit cards has had an even larger influence (negative in this case) on retirement security.— John Scanlon
- The sad part about tampering with SS is that many retirees, even those who have provided for themselves, can no longer go back to work in any meaningful (profitable) way, especially with the barren job market. It is wrong to change the parameters of SS when these seniors are vulnerable. Means testing is another unfair method of treating SS. Former Senator Kerry (now Sec. of State) implemented the taxation of SS benefits with means testing, while he avoids taxes on his yacht by docking it in RI rather than MA. Another example of a wealthy politician passing judgment on a senior citizen.— Princess of the city
- Or we could do nothing when it goes bankrupt in a decade. SSDI is already forecast to go south in 3 years, if not sooner. But we should totally continue to ignore the problem and blame those evil Republicans who have only been trying to keep it solvent for 30 years.— theodotius
- Soc Sec was conceived when the average life expectancy was LESS than the maximum benefit retirement age of 65. Sure this number is affected by higher birth and child mortality in the 1940's, and then as now if you live to 65 you are likely to continue to beat the average, but no one can deny Americans live much longer now. So the max retirement age got pushed to 67 form 65 for GenX-ers and younger.
Now something has to be done again to prevent the system from going bankrupt. I agree with the author, Jeff G, that COLA increases should be set such that retirees are mostly sheltered from inflation, especially as people live longer. Soc Sec should be indexed for the likely mix of goods and svcs used by seniors and should likely NOT be the same index that is used for Income Tax brackets.
To address the insolvency, one approach is raising the retirement age again, although this penalizes folks who work in laborious jobs who may not physically be able to work to 68 or more. (Or even 65-7)
If we, as a society, are all living longer and do not want a higher retirement age or lower benefits, then the only other option is a higher FICA tax rate. I for one, would trade a higher SocSec tax rate for lower taxes elsewhere (yeah, I'll keep dreaming). At least I get something for my FICA tax. At least I hope I will....— cogent1 - The rate does NOT need to be increased.
Simply, eliminate the cap and have people pay on their full income, including investment income.
And rather than raising the retirement age, it should be lowered.
As even some rightists admit, not everyone will be able to work until 70 or 75, just to keep themselves alive. Lowering the age to 60 would open up plenty of jobs for younger people who need them.
Finally, stop wasting billions/trillions on illegal wars for profit and bailouts of the 1% and make the Treasury/Congress REPAY the Social Security Fund all the money that ha been "borrowed" from it over the years.
SS is actually in good shape and would be absolutely fine if it was handled honestly by the pols in DC (and their corporate owners).
The "problem" does not have to and should not ever be solved on the backs of those with the least.
But austerity is only directed at those who cannot afford it while the rich get more handouts every day.— JeffJenk - Princess - a question...
I agree that Kerry avoiding/evading taxes like that is wrong. But he was just "taking advantage of the law the way it was written."
Is that any different from the massive off-shore tax evasion of the rich that we all know about and has come to light recently with a hacked data dump of overseas accounts held by 1%ers for the expressed purpose of evading taxation? Would you classify these actions as wrong?
How about someone on welfare also getting food stamps and other support?
Or the extremely profitable corporations that (excuse me, WHO since they are people now) get billions in tax breaks?
IF one is wrong, they all are.— JeffJenk - The more I read these comments the more I am unable to stop laughing. None of you posters are rich. None of you will ever be rich. The 1% would be laughing if they read these posts, but they don't read them. you shill for the rich and they don't even give you crumbs (defined pension plans) from the corporate table.— Harry Hoopes
- Chained CPI house with intact roof, oops shingle loose, oops small leak, oops leak with water spot on interior ceiling, hole in roof, ceiling falling, get the picture? steak,to pork ,to chicken,to hot dogs, to dog food. By the way your health insurance premium and drug bill increase 10 % Yep, bring on the chained CPI— craigpursell
Reach Jeff at jgelles@phillynews.com.
